Debt and equity securities that are neither held for trading, held to maturity, not held for strategic reasons

Held-to-Maturity securities

Debt investments (e.g., notes and bonds) are a company intends to hold until their maturity date

Fair value accounting

Often book value differs greatly from fair value on property, plant, and equipment assets

Trends towards Fair Value Accounting

1. GAAP principles can be conflicting re: fair value vs. book value
2. A higher percentage of total assets of many companies consists of assets with readily available fair values
3. World economy compels a worldwide set of accounting standards and the U.S. is being pressured to conform. One major difference is the use of fair values

Disadvantages to fair value accounting

1. Fair values are not readily obtainable for some assets/liabilities
2. Makes it more difficult to compare companies that use different methods
3. Using fair value accounting causes more fluctuations in accounting reports because fair values change year to year

Dividend yield

Measures rate of return to stockholders based on cash dividends

Formula for dividend yield

Dividend Yield = Dividends per Share of Common Stock/Market price per share of common stock

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